AUSTRAC battles crypto crime ‘blind spots’ - The first knowledge sharing application in Vietnam

“One of the things we were concerned about is that by registering, that would give people a false sense of security. We are not covering consumer protection.

“There’s a lot of people diving into crypto who don’t understand it is speculative and, sadly, they are losing a lot of money.”

Mục lục bài viết

Consumers ‘on their own’

Ms Rose’s comments came after Australian Securities and Investments Commission chairman Joe Longo urged investors to be careful investing in crypto assets, admitting the regulator was virtually powerless to intervene and consumers were “on their own”.

The government and financial regulators are in the early stages of plans to subject digital assets such as crypto to appropriate oversight and licensing arrangements.

AUSTRAC is the Australian government financial intelligence agency responsible for monitoring financial transactions to identify money laundering, organised crime, tax evasion, welfare fraud and terrorism.

Speaking at her office in Canberra, Ms Rose said crypto was “not a fad” and it could become ubiquitous like the internet.

A big regulatory “gap” for crime-fighting authorities was the transfer of crypto across international borders, which was often beyond AUSTRAC’s remit.

Digital trail

“If they’re involved in criminal financing, particularly internationally, that’s a whole blind spot for us,” Ms Rose said.

“If you can do it anonymously with crypto on the dark web, we lose all of that visibility.”

AUSTRAC is working with foreign counterparts to improve the international oversight of crypto, through the Financial Action Taskforce Group, the global intergovernmental body that sets international money laundering standards.

Treasury will consider forcing cryptocurrency exchanges to hold the assets of Australian investors onshore as part of a wave of new regulatory protection to come in next year.

Cryptocurrencies such as bitcoin, ether and tether are private digital currencies with no physical form and are challenging traditional banking systems and fiat money.

Criminals are exploiting the cryptocurrency market for financial crimes and to launder money.

Though it can be difficult for authorities to track users, cryptocurrency can create opportunities for intelligence analysis because it leaves a digital trail.

AUSTRAC has focused on the entry and exit points of the digital currency system, using fiat currency to buy digital currency or converting digital currency back into fiat currency.

In February last year, AUSTRAC helped Victoria Police seize more than $8 million of cryptocurrency, as part of a continuing investigation into online drug trafficking.

Victoria Police also seized drugs and assets including vehicles and property to the total value of $13.1 million.

The Financial Review reported last year that criminals had exploited vulnerabilities in Australia’s search engine and cryptocurrency infrastructure to dupe small investors out of millions of dollars, luring them with the promise of high-yield funds badged by some of the finance world’s most trusted brands.

Complex scheme

The complex scheme involved stolen identities, several British scammers impersonating real bankers, and fraudulent prospectuses that claimed to represent high-yield investment funds run by global managers such as Citibank, Nomura, HSBC, Pimco and IFM Investors. It has ensnared millions of dollars from unsuspecting victims who sought better returns as interest rates collapsed during the COVID-19 crisis.

Ms Rose welcomed Treasurer Josh Frydenberg’s announcement in December that the government and financial regulators will move to subject digital assets such as crypto to appropriate oversight and licensing arrangements.

“Having everyone moving in the same direction will be helpful,” she said.

Under the current law, ASIC cannot intervene on crypto to protect consumers because it is not considered a financial product, except for exchange-traded funds linked to crypto assets that are traded on a licensed exchange.

Ms Rose said emerging technology businesses entering the market, such as crypto exchanges and buy now, pay later operators, often did not understand their anti-money-laundering and counter-terrorism financing obligations.

A key obligation of crypto exchanges was to conduct know-your-customer (KYC) checks.

“During COVID we’ve seen some of the bad behaviour and risks escalate, by simply not having any risk mitigation and not taking those requirements seriously,” she said.

Some crypto operators had been deregistered by AUSTRAC or had been refused approval, she said.